LANSING — The Michigan Department of Health and Human Services is looking to open mental health services to a competitive procurement process, a move that has drawn criticism from mental health advocates and organizations across the state.

Maribeth Leonard, CEO of LifeWays- a community mental health services program that serves Hillsdale and Jackson counties- outlined how this proposal could upend Michigan’s existing system of regionally governed behavioral health oversight.

In a letter to the community. Leonard said the change in the funding model would “move decisions about mental health care funding and oversight further from the communities they serve, threatening the transparency, accountability, and responsiveness that define Michigan’s public system.”

Michigan’s current infrastructure comprises ten Prepaid Inpatient Health Plans, or PIHP. These regional administrative entities are charged with managing a region’s behavioral health Medicaid funds. The Mid-State Health Network, for example, serves 21 counties and consists of 11 different community mental health organizations, including LifeWays.

This is not the first time prepaid plans have been threatened with privatization. Indeed, there have been at least five serious attempts over the past decade. Most recently, bills introduced by Republican lawmakers in 2021 stalled in the state Legislature after encountering significant opposition from mental health advocates. Before that, in 2019, Governor Gretchen Whitmer, a Democrat, issued a line-item veto rejecting a budget provision that would have advanced a privatization pilot program first introduced under the administration of former Republican Gov. Rick Snyder.

In this instance, however, the push for privatization comes not from a Republican-led legislature, but from a department within the state’s Democratic-led executive branch: the Michigan Department of Health and Human Services.

According to MDHHS, the shift to competitive procurement is intended “to address issues within the current PIHP system that compromise service quality, accountability, and efficiency.” The department cited “fragmentation, service inconsistency, and limited accountability” as critical flaws in the current PIHP system.

The department is advancing a plan that would open the contracts for regional prepaid plans to competitive bidding, allowing large nonprofit entities with no local ties to apply. A letter from LifeWays CEO Maribeth Leonard explained that, while the proposal “requires that bidders be nonprofit entities, it still allows large private nonprofits –some of which may operate outside of our region or even our state, like Blue Cross Blue Shield or Meridian Health Plan– to take over functions currently managed by locally governed public agencies.

The state health department conducted a month-long survey in March 2025, reaching out to 2,600 Michiganders and garnering various perspectives. In a statement to Michigan Advance, the agency elaborated that the plan for privatization was “informed by extensive feedback” from Medicaid beneficiaries and their families, community-based organizations, advocacy groups, and o

In addressing the survey responses, the department said that the proposed plan would “help to increase consumer choice and access to services while preserving the Community Mental Health Services Programs.”

Furthermore, the department used the survey responses to develop a four-pillared approach to their proposal, striving to “provide high quality, timely services, improve choice & consistency across regions, ensure accountability & transparency, and simplify the system with reduced bureaucracy.”

Interestingly, while both state health department and mental health advocates cite accountability, transparency, and improved response as primary objectives, they propose fundamentally different solutions to achieve them.

Leonard pointed out that the implementation of this proposal could have unintended consequences, namely increased wait times, lower service quality, decreased provider rates, and heightened rates of provider turnover and closures.

Leonard’s concerns are a reality for several other states: Oklahoma predicted that privatizing mental health care would cost the state an additional $716 million annually. A June 2024 state report from Oregon found that privatization had led to an influx of “phantom networks”–provider directories listing clinicians who aren’t actually accepting patients. North Carolina saw a drastic increase in staff turnover in public-sector mental health, as well as significant increases in behavioral health-related emergency room visits.

In a letter to Governor Gretchen Whitmer, the Michigan Association of Counties explained that private health plans operate at higher cost than their public counterparts. The current system spends approximately 2% of Medicaid funding on administrative costs, marketing, billing, and executive salaries. On the other hand, privatized infrastructures typically spend around 15% on these overhead costs.

In short, the letter continues, “such an increase would divert over $500 million annually from direct services to administrative expenses, exacerbating existing funding shortfalls and diminishing the quality and accessibility of care.”

Similarly, Leonard emphasized that even if the infrastructure is reduced, the necessity remains. The only difference, she noted, is that those in need of mental health services will end up elsewhere.

“They’re going to end up in other places-in your jails, they’re going to end up in your emergency departments,” said Leonard. “The need won’t go away.”

“The other key thing,” she added, “is that right now, the mental health code requires, on our board, the participation of those with lived experience. You’re not going to have that with a private plan.”

The Michigan Department of Health and Human Services plans to issue a request for proposal sometime this summer, with the proposed service start date scheduled for October 1, 2026. At this point, the language of the proposal has yet to be formalized.

However, Leonard noted that, based on the preliminary proposal requirements, none of Michigan’s prepaid plans would be eligible to apply. In short, another organization would be able to take control of the state’s mental and behavioral health infrastructure.

Further, she explained, shifting towards a privatized model would divert decision-making power away from the communities. Unlike the current infrastructure, private non-profits are not subject to Freedom of Information Act requests, which would leave the community with limited tools to monitor decision-making, spending, or performance. Essentially, Leonard explained, the proposal “threaten[s] the transparency, accountability, and responsiveness that define Michigan’s public system.”

LifeWays will be hosting an educational forum for state legislators on July 25 that will include a detailed briefing from the Community Mental Health Association of Michigan and the opportunity to engage with community members, local leaders, and policymakers.